Many of Detroit’s most pressing
public problems are—by
necessity—being solved
outside of the public sector.
As prolonged financial troubles and
the consequent bankruptcy prevented city
government from performing its core functions,
Detroit’s private, philanthropic, and
nonprofit organizations have stepped in to
play substantial roles.

This special supplement examines Detroit’s emergence from bankruptcy and its economic revival. It was produced in collaboration with The USC Center on Philanthropy and Public Policy and supported by The Kresge Foundation.

This is a significant and perhaps prophetic
state of affairs. The assumption of new roles
by these sectors might never have happened
were it not for the magnitude of the financial
crisis. Detroit’s bankruptcy shook leaders from
all sectors out of complacency and compelled
them to think in more audacious terms. The
crisis also compelled authority figures in governmental
roles and beyond to permit more
out-of-the box solutions and remove many of
the disincentives to risk taking. In this environment,
new ideas could—and did—spring from
all types of city stakeholders.

Importantly, however, prior to Detroit’s
bankruptcy, the city had already established
a tradition of collaboration among foundation
presidents, government leaders, and
corporate CEOs. An existing scaffolding of
informal working relationships and communication
channels allowed these actors
to respond to the acute crisis in a coordinated
way. Prior to the crisis, there were only
a few partnerships designed to formally
distribute responsibilities between government
and other sectors. But there was a culture
capable of incubating and supporting
such solutions. Leaders had already learned
how to overcome frictions inherent in
cross-sector collaboration, and to complement
one another, strategically aligning the
strengths of each sector. These were critical,
if nascent, capabilities. And as more US cities
look for unconventional approaches to
solve their most pressing problems, these
capabilities may hold the key to success.

Unconventional Approaches

It is not surprising, then, that foundation and
business leaders were poised to make unprecedented
moves to address Detroit’s challenges.
The Grand Bargain, the agreement in
which foundations contributed $370 million
to limit pension fund reductions for city employees
and retirees, preserve the Detroit Institute
of Arts and its world-class collections
of art, and protect the city from lawsuits, is
only the most dramatic instance of the unconventional
approaches to problem solving
we’ve seen in Detroit. There are other illustrative
examples of the philanthropic and private
sectors stepping in to help Detroit’s city government—most notably the eight listed below.

Eastern Market | Eastern Market, the
largest historic public market district in the
country, has served as a center for the sale
of meat, produce, spices, and other products
in Detroit since the early 19th century. For
most of its history, the market was managed
by the city. But in 2006, as funds dwindled,
a coalition of market vendors urged the
mayor and city council to transfer management
of the market to a new nonprofit, the
Eastern Market Corporation. The corporation’s
board was carefully composed to
include public, private, and civic leaders.
This arrangement has been able to mobilize
more resources, renovate infrastructure,
increase and diversify the customer base,
and catalyze development in surrounding
neighborhoods. Whereas similar markets in
other cities have become trendy, high-end
retail centers, Eastern Market remains a
functioning hub for the city’s food economy.

Detroit Future City | At the depths of
the Great Recession, Detroit needed a visionary
new master plan; many considered
the city’s existing plan, approved in 1992, to
be out of touch with current realities. Knowing
that the city’s Planning and Development
Department lacked the resources to create
one, a group of foundations stepped into the
breach. Together with the Detroit Economic
Growth Corporation, these foundations undertook
a large-scale community engagement
and visioning process, overseen by a
steering committee established by Mayor
Dave Bing. The result was the Detroit Future
City (DFC) Strategic Framework. The plan
pragmatically accepts a reduced population,
consolidates housing in a smaller footprint,
and designates some of the most abandoned
areas for agriculture or parkland.

In 2014, mindful of the pressures still
straining city government, a consortium
of public agencies and foundations formed
the DFC Implementation Office to handle
its execution. This quasi-independent entity
is intended to fulfill the vision in close
coordination with the city, and yet remain
unhindered by resource constraints and
short-term political exigencies. It also aims
to sustain citizen engagement through
the implementation phase. For example, a
property-blight-abatement task force recommended
by DFC recently enlisted 125
youth with smartphones to document all
390,000 land parcels in the city.

Gilbertville | The Detroit Downtown
Development Authority continued to advance
projects during the bankruptcy, including
a federally funded entertainment
complex. But overall Downtown revitalization,
dependent on local tax base reinvestment,
remained out of reach. With $2.2 billion
of his own money, Dan Gilbert, founder
of Quicken Loans, purchased and refurbished more than 90 properties, mostly in
Downtown, including landmarks such as
One Woodward, One Detroit Center, Chrysler
House, the State Savings Bank building,
and dozens of structures lining Woodward
Avenue and clustered near the Grand
Circus, Campus Martius, and Capitol Parks.
In the first wave, Gilbert moved 1,700
Quicken employees into the area and persuaded
other companies to do the same.

Today, 15,000 employees of Quicken or its related companies work Downtown.
And Gilbert recruited 160 business tenants,
including start-ups financed by
his venture capital firm. The revitalization
has created an estimated
8,000 new jobs. This bold undertaking required that Gilbert’s development
company, Bedrock Real Estate Services,
build in-house planning and project
management capacity comparable to that
of a public development authority. The consolidated
land ownership and resulting gentrification
have stirred controversy, leading
some to redub Downtown as “Gilbertville.”
But approximately 66 percent of occupants
in the buildings that Gilbert redeveloped are
not his own companies, and the acceleration
of Downtown redevelopment is undeniable.

Pink Zones | Struggling to revitalize aging
retail areas, the city found that its own
regulations—minimum parking requirements,
costly rezoning processes, and environmental
impact reports—were impeding small developers and business owners from
redeveloping properties. To ease those constraints,
Detroit agreed to designate a limited
number of Pink Zones, where many
of the normal rules don’t apply and there’s
much less red tape. The Knight Foundation
has funded the Department of Planning
and Development to recruit designers and
planners to create a general framework for
anyone who wants to start a new business
or build in those areas, with preapproved
template plans that can be used by builders
to speed up a new development. Outside
the Pink Zones, similar efforts
permit bottom-up business
development and urban design
projects to emerge with little regulation and no public funding. With the
approval of the Department of Planning
and Development, for example, Human
Scale Studio is working on urban design
improvements, including lane closures and
bike lanes, in the Corktown neighborhood.
Similarly, Revolve Detroit, a partnership
between Detroit Economic Growth Corporation
and community groups, encourages
artists and entrepreneurs to immediately
populate otherwise vacant properties.

M-1 RAIL| For years, the city had recognized
the need for public transit to connect
the Downtown, Midtown, and Center City
areas and catalyze economic development
in all three. By 2007 it was evident that the
Detroit Department of Transportation could neither finance such a project on its own nor
successfully unlock available state and federal
resources. In response, a consortium
of foundations and businesses entered into
a public-private partnership with local government,
the State of Michigan, and the US
Department of Transportation to get the job
done. In 2009, a grant of $35 million from The
Kresge Foundation liberated $25 million in
matching support for public transit from the
US Department of Transportation. The city
council then approved the sale of $124 million
in bonds. Together, the private investors
provided the funding to establish M-1 RAIL, a
nonprofit organization that is overseeing the
design, construction, and operation of the
3.3-mile $140 million circulating streetcar
line along Woodward Avenue.

At one point, the federal government
withdrew support for
the rail line in favor of a regional
bus system. But the private investors
remained committed to the
project. In 2016, the rail was renamed
the Q line in recognition of
major support from Quicken; and
the Penske Tech Center, named
for M-1 RAIL Board Chair Roger
Penske, was opened to house administrative,
operating, and maintenance
services for the streetcars.

Detroit Land Bank Authority | While many cities have land
banks, the sheer scale of Detroit’s
vacant and abandoned land inventory
required a larger-than-usual
institution with extended reach.
Funders and other partners mobilized
to expand the Detroit Land
Bank Authority (DLBA) to a staff
of almost 100 employees. With nearly 95,000
unused parcels in the city, it has auctioned
and sold more than 500 houses to new owners.
It has piloted innovative “side lot fairs,”
expediting the sale of nearly 3,000 vacant
side lots that are adjacent to owned properties.
DLBA has mobilized community groups
and residents to identify dangerous nuisance
properties, and DLBA’s Nuisance Abatement
Program has filed lawsuits against absentee
landlords, with more than half of those cases
already resolved in the city’s favor. It has also
formed a network of community-based nonprofits
and churches, encouraging them to
buy, refurbish, and sell portfolios of contiguous
or proximate properties to be redeveloped,
creating a critical mass of revitalization and a positive spillover effect. Alternatively,
the groups are enlisted to prescreen and recommend
bidders from among their constituents
or parishioners.

Detroit Innovation District | While
many cities have departments focused on
attracting and retaining new growth industries,
Detroit historically depended on the
dominance of the auto industry to fill that
function; it lacked a dedicated department
with that focus. Now, the New Economy
Initiative (NEI), a collaborative of foundations
and other partners, is on the job.
Formed in 2007, NEI began funding activities
designed to incubate new economic
ventures with the potential to spark the
growth of new industries. To date, it has
concentrated its efforts in an approximately
four-square-mile geographic area
that it hopes will serve as a magnet for new,
future-oriented business activity.

NEI refers to this district as a “platform,”
not a “place,” because it is focused on
the potential of networking. It has aimed to
cluster start-up businesses around anchor
institutions such as universities and hospitals,
and to drive connectivity among them
through a highly wired business incubator
called TechTown, formed in conjunction
with Wayne State University. The process
mimics the way agglomerative economies
have formed throughout urban history. In
2014, Mayor Duggan gave the district a formal
city designation—the Detroit Innovation
District—and appointed an advisory
committee to oversee its development.
The district occupies only 3 percent of the
city’s land mass but currently provides 50
percent of its jobs.

Data Driven Detroit | As new players
pursued more active roles in addressing
Detroit’s challenges, they needed up-to-date
data and analytics to inform their decisions.
But municipal departments were limited in
the extent to which they could respond to
data requests. In 2008, foundations invested
$2 million to create Data Driven Detroit
(D3), an independent platform designed
to democratize access to information. D3’s
interactive platforms provide easy access
to data and generate maps, charts, and
graphics. The interactive Student Dispersion
map, for example, displays data on the
city’s schools, including where students
from each school live. Another interactive
platform, Motor City Mapping, provides detailed
data on every land parcel in the city,
including the aforementioned photographs
taken by youth at every site. Neighborhood
Asset maps plot strategic resources that
can be accessed for a range of social service
and community organizing projects, while
customized maps disaggregate key citywide
indicators to display where problems or opportunities
are concentrated.

Through hands-on workshops, users
can learn methods for combining, synthesizing,
and analyzing datasets in order to reveal
practical insights. Clients include city
agencies, foundations, nonprofit organizations,
private businesses, resident associations,
and individuals. Incubated at a nonprofit
intermediary called City Connect, D3
was taken over by the Michigan Nonprofit
Association in 2012. In 2013, it was incorporated
as a private entity: a low-profit limited
liability company.

Benefits and Concerns in a Brave New World

These examples only begin to suggest the
widespread transformation in urban governance
that is under way in Detroit. Taken
to their logical conclusion, they hint at a future
Detroit where philanthropy and business
routinely supplement and complement
government, bringing their distinct
resources and competencies to the table.
And given the continuing trend toward fiscal
austerity in cities nationwide—not to
mention the lengthening list of municipalities
confronting bankruptcies—the involvement
of philanthropic and private sector
partners in public problem solving suggests
that a sector-agnostic approach to running
cities may become the norm.

But while the primary impetus in Detroit
was financial necessity, each one of the inventive
strategies has demonstrated benefits
that do much more than achieve efficiencies.
They suggest that higher-quality problem
solving may need to occur outside the constraints
of governmental bureaucracy, especially
during times of paralyzing crises and
political upheaval, when new ideas are often
stifled. These unconventional collaborative
groups created new, protected spaces for
hammering out solutions, bypassing competitive
bidding in favor of executive decisions,
and allocating resources freely without
concern for government cost-control
standards or budget scrutiny. The novel ideas
they generated often drew on a caliber of national
talent or expertise that is common in
the foundation and business world but would
be difficult for a city treasurer or municipal
accountant to justify.

The benefits notwithstanding, this
brave new world of urban governance raises
fundamental questions and concerns.
As a society, we are deeply invested in the
boundaries that distinguish the sectors and
define their identities. Blurring the edges
between public, private, and philanthropic
enterprise can be disconcerting at best and
downright alarming at worst. Conflicting
and contentious views of multisector involvement
and leadership are already coming
to the fore as Detroit struggles with one
of its greatest unmet challenges: a woefully
inadequate and failing school district.

Further, creative strategies that freely
combine public, philanthropic, and market
solutions often depend on loose-knit, timelimited,
or informal collaborations across
sectors. Collaborations such as these can be
difficult to sustain when the crisis that led to
their creation fades.

And what does it mean for democratic
process when programs or services that
were previously the domain of government
are undertaken outside the traditional
framework of public accountability?
Foundation presidents are, after all, not
elected. And foundation boards are sometimes
viewed as “private legislatures” that
establish and carry out their own agendas.
Meanwhile, the private sector, of course, has
its own accountability structures that are
based on profits and shareholder returns,
not on voter mandates. When these imperatives
coincide with public objectives, the potential
for positive outcomes is enormous.
But what if they cease to align or come into
conflict? Can these unorthodox partnerships
maintain stability and consistency
and continue to achieve public goals?

New Institutional Structures

If Detroit is any indication, some of the answers
to these challenges lie in the creation
of new institutions and structures that formalize
and manage cross-sector interactions.
Entities such as the DFC Implementation
Office, Eastern Market Development Corporation,
and the M-1 RAIL are all nonprofits
dedicated to discovering productive points of
collaboration among sectors. D3 is a limited
profit firm that circumscribes its own profit
making by limiting it within a social mission.
These entities are guided by governing boards composed of leaders from multiple sectors,
and cooperative arrangements and protocols
have been put in place for how they will coordinate
with city government.

To reinforce their credibility and legitimacy,
some of these new institutional structures
have invented accountability measures
that mirror those in the public sector. The
massive community engagement process
undertaken by DFC, for instance, touched
tens of thousands of households, a scale of
resident input to which any city government
would aspire. And D3’s open sourcing and
access ensures that anyone can contribute to
the accuracy of its database and interpret the
information freely.

Further, the governance structures for
these efforts have been composed with an
awareness of the need to strike a balance
between optimizing the freedom of the private
and philanthropic sectors and maintaining
coordination with city government.
The legal and advisory boards of DFC, M-1
RAIL, and Eastern Market Corporation are
self-consciously representative of the city’s
diverse array of stakeholders and are explicitly
committed to inclusion and equity.

New Forms of Leadership
Another piece of the puzzle involves the
emergence of new leadership styles among
foundation presidents and corporate CEOs.
In Detroit, many are acquiring greater sensitivity
to the nature of government bureaucracies
and more patience with the slow
pace of systems change. They are becoming
educated in complex questions of public finance
and urban policy. And they are learning
how to identify their strengths relative
to government, offering up these strengths
in strategic ways. At its best, philanthropy
can bring its freedom to focus on the long
view, a comfort with unorthodox approaches,
an appetite for risk, and an ability to use
funds flexibly. Business has the potential to
contribute vast capital reserves, operational
efficiencies, an aggressive focus on goals,
and an entrepreneurial spirit.

The most important factor in sustaining
cross-sector solutions may be found in
the governmental leaders themselves. As
Detroit’s city government returns to a new
normal, public officials are learning how to
recalibrate their roles to orchestrate the contributions
of players over whom they have
no direct authority. The mayor and council
members are learning to forgo command-and-
control models of leadership, embracing
instead more delicate approaches based
on influence or negotiation. Governmental
agencies accustomed to being self-contained
bureaucracies are utilizing partnerships
to get things done or allow other sectors to
embed new talent into their organizations.
Sometimes, the role of government may even
be to simply step out of the way.

This shift in leadership style is no small
feat in Detroit, and it would not be easy in any
American city. From the days of George B.
Cox’s Cincinnati in the late 19th century, the
rise of “bossism” not only was a very practical
response to the rapid urbanization in this
country; it became our signature style of urban
governance. It was based on a political
machine in which strong mayors and council members
maintained patron-client relationships
with voter blocs while engaging in a
kind of brokerage relationship with big business.
In Detroit, which was built in large part
by the three automotive giants, labor unions,
and a succession of strong-willed mayors,
the tendency to centralize power runs particularly
deep. But the enormity of problems
facing cities today requires a much greater
degree of distributive leadership, with ideas
and resources coming from all over.

In the end, flexibility and adaptability are
key. Leaders in Detroit hasten to emphasize
that the goal is not to replace one rigid system
of defined roles with another. Instead, it
is about ensuring that leaders in all sectors—
public, private, and philanthropic—trust
each other enough to periodically redefine
divisions of labor among them based on realistic
assessments of each sector’s strengths
and capabilities. The governance structures
of partnership configurations should include
leaders who can continually assess
whether a structure is working or whether
roles need to be reassigned. As Detroit’s government
returns to a relative state of equilibrium
and some functions are restored to
the municipality, the flexibility of the partnerships
is being tested.

National Urban Policy

If cross-sector solutions are an aspiration
we hold for all American cities, it will need
to be reflected at the highest policy levels
and in the methods through which federal
agencies fund cities. The US Department of
Housing and Urban Development (HUD)
was quick to recognize the reshuffling of responsibilities
among sectors and eager to be
supportive. Importantly, before deploying
funding and technical assistance to Detroit,
HUD looked for evidence that cross-sector
partnerships were genuine and based on
trust. HUD acknowledged and rewarded
this trust building by providing maximum
flexibility in the way Detroit used its funds.

Nationally, HUD increasingly stipulates
that cities assemble stakeholders from the
various sectors and clarify the division of
labor among them as a prerequisite to funding.
It seeks to mirror that coordination by
streamlining its local interactions with other
federal agencies, such as the Department of
Justice, Department of Education, and Department
of Transportation. Through its
Strong Cities, Strong Communities (SC2)
initiative, an enlargement of the practices it
developed in Detroit, HUD aims to support
top-down partnerships among federal agencies
that can reinforce local cross-sector solutions
in cities around the country.

Toward State-of-the-Art Urban Governance

At present, we still have little precedent for
situations where nongovernmental actors
play such a direct role in running cities. Detroit’s
efforts to avoid financial collapse offer
crucial lessons. So, too, does New Orleans in
the aftermath of Hurricane Katrina, or Baltimore
after its recent wave of civil unrest.

But there have been few learning networks
for cities solving problems outside
the public sector. Many of the most recognized
programs celebrating innovative
urban problem solving, such as Harvard
University’s Innovations in American Government
Awards or the Bloomberg Foundation’s
What Works, have highlighted state
and local government interventions. There
have simply been fewer settings for lifting
up solutions arising at the edges of government,
where public leaders team up with
their counterparts in philanthropy and the
market. Nevertheless, efforts by the Aspen
Institute Center on Urban Innovation and
The Kresge Foundation’s American Cities
Practice are broadening that dialogue.

In the end, if we are to fully absorb the
implications of Detroit and combine the lessons
learned there with those in other cities
nationwide, we will need to broaden our definition
of what state-of-the-art urban governance
looks like in the 21st century. And
we will need to learn how to create such governance
in cities long before crisis arrives.

Elwood M. Hopkins, an urban planner, is founder and managing director of Emerging Markets, Inc., a consulting firm that helps supermarket chains and financial institutions open stores and branch locations in low-income neighborhoods.

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